Both outperformed national house price growth, which fell by 1.1% and the London land market was the most buoyant with overseas demand in particular for central sites.
The increases in land values reflect a general shortage of suitable, permissioned land in the market, despite early signs that the National Planning Policy Framework is leading to more consents, including those from appeal decisions, Savills says.
At the same time, demand has increased as house builders and developers have worked through their inventory of sites brought prior to the downturn, and are now actively seeking to bolster their land pipeline.
Outside London the problem is particularly acute in the West Midlands and South Wales, where very specific market conditions have buoyed land values. An acute shortage of permissioned land, the result of hold ups in local planning systems, has pushed up values as buyers have bid for a limited pool of sites. Savills Western region Greenfield Index recorded growth of 3.1% over the last six months of 2012 alone.
Broadly, the southern regions still outperform those in the north in terms of land value recovery, but the full picture is more complex than a straightforward regional one, Savills points out.
House builders are targeting their activity so demand is also strong for consented land in high value regional towns and cities across the whole country. While locations in the South East still dominate the top 10 performing locations for land price growth in 2012, locations in the West Midlands, South West, Wales and Scotland are also in demand.
The top performing town outside of London was Sevenoaks, followed by Maidstone and Crawley, all in the South East. Then came Exeter, Solihull, Canterbury, Swansea, Haywards Heath, Leamington Spa and Edinburgh, the index shows.
Recapitalised house builders are reporting steadily increasing profits and reduced debt and are increasingly using their balance sheets to fund land purchases. Savills says that this has become particularly important in stronger housing markets with limited stocks of permissioned land, where competition is greatest. In these markets, cash buyers have the edge to seal the deal. In central London, nearly all transactions are taking place on this basis.
By contrast, it adds, funding and risk issues still remain a major barrier to bringing forward large, complex and marginal sites. This has created the necessity of a ‘build now, pay later’ land development model.
It predicts that some land owners will increasingly need to be co-investors or joint venture rather than outright, up front sellers. This applies to both the public and private sector, but some of the public sector land initiatives recently announced have the potential to start bridging the delivery risk gap.
Buoyed by overseas equity and a strong domestic economy, demand for London residential property is high, and the London land market remains resilient. There is a good demand from investors for flats in central London, with recent schemes achieving high levels of market absorption aided by strong sales at overseas launch, forward funding the development process.
In London some 21.4% of land transactions took place in Westminster, the heart of prime central London and lead recipient of global wealth. After Westminster, the boroughs that saw the greatest volume of land transactions were Camden, Southwark , Wandsworth, and Lambeth.